Aditya Birla Sun Life AMC IPO

IPO Note

Aditya Birla Sun Life AMC Limited

• Incorporated in 1994, Aditya Birla Sun Life AMC is set up as a joint venture between ABCL and Sun Life AMC. The company managed a total AUM of ₹2,736.42 billion under mutual funds (excluding our domestic FoFs), portfolio management services, offshore and real estate offerings, as of June 30, 2021.
• The company has automated and digitized several aspects of its operations including in relation to customer onboarding, online payments and other transactions, fund management, dealing, accounting, customer service, data analytics, and other functions.
• The company is the largest non-bank affiliated Asset Management Company (AMC) in India by quarterly average assets under management (QAAUM) since 31 March 2018 and is among the four largest AMCs in India by QAAUM since 30 September 2011.
• Geographically diversified pan-India distribution presence covering 284 locations spread over 27 states and six union territories. The company’s distribution network is extensive and multi-channelled with a significant physical as well as digital presence, and included over 66,000 KYD-compliant MFDs, over 240 national distributors and over 100 banks/financial intermediaries, as of June 30, 2021.
• The company managed 118 schemes comprising 37 equity schemes (including, among others, diversified, tax saving, hybrid and sector schemes), 68 debt schemes (including, among others, ultra-short- duration, short-duration and fixed-maturity schemes), two liquid schemes, five ETFs and six domestic FoFs, as of June 30, 2021.
• Total QAAUM (excluding our domestic FoFs) has grown over the years and was ₹2,654.54 billion, ₹2,672.68 billion, ₹2,465.22 billion and ₹2,464.80 billion as of June 30, 2021, and March 31, 2021, 2020 and 2019, respectively.

KEY MANAGERIAL PERSONNEL

• A Balasubramanian is the Managing Director and Chief Executive Officer of the Company and has been associated as an employee in the Company since 1994.
• Mahesh Patil is the Chief Investment Officer who holds a bachelor’s degree in engineering from the University of Bombay and a master’s degree in management studies from the University of Bombay and has been associated with the company since 2005.
• Bhavdeep Bhatt is the Head - Retail Sales and holds a bachelor’s degree in commerce from Bhavnagar University and a master’s degree in business administration from Bhavnagar University and has been associated with the company since 2008.
• Anil Shyam is the Head - Alternate Business and holds a bachelor’s in commerce and master’s in finance & control from Himachal Pradesh University, Shimla and has been associated with the company since 2007.
• Parag Joglekar is the Chief Financial Officer and holds a bachelor’s degree in commerce from the University of Bombay. He is a member of the Institute of Chartered Accountants of India and is a member of the Institute of Cost and Works Accountants of India and has been associated with the company since 2006.
• Keerti Gupta is the Chief Operations Officer and holds a bachelor’s degree in science (home science) from Rajasthan Agriculture University, Bikaner, and a master’s degree in business administration from Maharishi Dayanand Saraswati University, Ajmer and has been associated with the company for the last 25 years.
• Vikas Mathur is the Head - Institutional Sales and holds a bachelor’s degree in electronics and communication engineering from the University of Madras, a postgraduate diploma in business entrepreneurship and management from the Indian Institute of Planning and Management and a master’s degree in business administration from the International Management Institute and has been associated with the company since 2008.

COMPETITIVE STRENGTHS

• Largest Non-bank Affiliated Asset Manager in India.
• Well-Recognized Brand with Experienced Promoters.
• Growing Individual Investor Customer Base Driven By Strong Systematic Flows and B-30 Penetration.
• Diverse Product Portfolio with Fund Performance supported by Research Driven Investment Philosophy.
• Geographically diversified pan-India distribution presence that is not only extensive but multi-channelled, with a significant physical as well as a digital presence.
• Franchise Led By Experienced and Stable Management and Investment Teams.
• Long-term Track Record of Innovation in and Use of Technology.

KEY CONCERNS

• The COVID-19 pandemic has had, and we expect it to continue to have, a material adverse effect on business.
• Revenue and Profit are largely dependent on the value and composition of the AUM of the schemes managed by us and any adverse change in our AUM may result in a decline in our revenue and profit.

The SME-IPO is purely OFS based where the company will not get anything from proceeding.

• Their market share might be eroded by competition from existing and future market competitors offering investment products.
• They rely heavily on the strength of their brand and reputation to succeed.
• The regulatory environment in which we operate is subject to change.

COMPARISON WITH LISTED INDUSTRY PEERS (As of 31st March 2021)

Name of the CompanyEPS (Basic)NAVP/EP/BRoNW (%)Aditya Birla Sun Life AMC Limited18.2759.1938.912.0230.87Peer GroupHDFC Asset Management Company Limited62.16224.2850.914.227.76Nippon Life India Asset Management Limited11.0450.2938.48.621.94UTI Asset Management Company Limited38.97255.3130.14.315.27

FINANCIALS (RESTATED CONSOLIDATED)

Particulars (Rs. In Millions)FY 2021FY 2020FY 2019Equity Share Capital180.00180.00180.00Other Equity16,866.1312,988.7312,025.65Net Worth17,046.1313,168.7312,205.65Revenue from Operations11,910.2812,338.3514,060.67EBITDA7,388.877,026.926,839.03Profit Before Tax6,958.886,607.296,457.67Net Profit for the year5,262.804,944.024,467.99

Outlook &  Company Valuation

The AMC industry has grown tremendously in recent years on the back of strong flows by the individuals as the AMC companies are increasing penetration across geographies. Also, the tech easiness is helping the millennials to get access to AMC easily.

• At the upper price band of Rs 712, the PE works out to be 33x based on annualized FY22 earnings which are slightly lower than peers. So there is room for minor listing gain also the IPO is purely OFS based.
• Thus, we assign a “SUBSCRIBE” rating to the IPO for the long-term investors. We believe that going forward the company will get benefit as the millennials are keen into the stock market and we have seen tremendous account opening which will lead to flow in AMC too.